Activity Based Budgeting
Overview of ABB
Activity Based Budgeting (ABB) is a method of budgeting designed to provide greater transparency into the budget process. In its most basic form, ABB is a method of budgeting in which revenues generated from instructional and research activities are allocated directly to the unit responsible for the activity. ABB 'empowers' greater local planning and accountability and creates incentives for units to more efficiently manage resources and expenditures. Further, direct control of resources generated from activities creates incentives to set priorities and develop new activities consistent with the overall mission and strategic goals of the institution.
The University of Washington fully implemented an ABB system at the beginning of the 2013 fiscal year. This brief from 2012 provides an overview of ABB implementation. The ABB report here includes individual decision summaries which were submitted to the President and Provost in October 2011.
Components of ABB
ABB Tuition Calculation and Distribution
The following resources provide an overview of ABB tuition revenue distribution including fiscal information and modeling:
An Intro to ABB Tuition for Unit Administrators provides a more detailed explanation for those who need to understand more about the details of the process.
ABB Tuition Revenue Distribution Manual provides a detailed, technical explanation of how tuition revenue is projected and how the distribution calculations are made.
ABB Tuition Distribution Model provides unit-level detail for FY12 through FY16. The "Reference"tab provides an explanation to help the user understand the meaning of the many tabs. The file includes tabs showing projected tuition revenue, actual net operating tuition revenue, and detailed calculations of the distribution of tuition revenue to schools and colleges for each fiscal year since FY12. The file also includes calculations of the "true-up" and incremental tuition revenue. The summary tab shows the projected and actual distributions for each year.
ABB Review Committee
When ABB was adopted in 2012, a commitment was made to leave the basic elements in place for five years to provide an opportunity to understand the consequences of ABB as it was initially structured. In the meantime, an ABB review committee was formed to monitor and review the current model and to provide recommendations about possible changes that might be considered. The recommendations provided by the committee were taken into consideration by the Provost and the President and in July 2015, faculty committees were charged with investigating four areas of academic life that are imperfectly addressed by the current budget model. Committee charge letters and their final reports are available below:
- The Faculty Council on Academic Standards reviewed educational collaboration, with a focus on joint courses/degrees and new academic initiatives. The final report is available here for review.
- The Faculty Council on Research considered whether ABB affects collaboration in research. The final report on the effects of ABB on collaborative research is available here for review.
- The Faculty Council on Teaching and Learning investigated the current treatment of summer quarter as an Educational Outreach endeavor and exploring related implications on faculty salaries and research and the final report is available here for review.
- The Graduate School Council discussed cross-college hiring of graduate students and graduate student waivers and the final report is available here for review.
The ABB Review Committee will work with faculty and the Board of Deans and Chancellors to address the recommendations from these committees during the upcoming ABB Phase II process.
Upcoming ABB Phase II Process
As noted, a commitment was made to leave the basic ABB elements in place for five years, with the understanding that after five years, there would be a thorough review of ABB as it currently operates.
The FY15 ABB Review Committee held a preliminary meeting in October 2015 to brainstorm a range of topics and scope for the upcoming ABB review. Once recommendations are received from the four faculty committees above, the ABB Review Committee will be charged with Phase II work. Materials from the initial meeting are below:
ABB Survey Responses
ABB committee members suggested that deans, administrators and faculty leaders receive a survey to provide feedback about ABB and make suggestions as to the scope of the Phase II committee work. The survey was released in early January, 2016 and the results of the survey are available here for review.
ABB Concerns, Questions, & Suggestions?
Submit a form, if you have any concerns about the nuances of the ABB methodology or suggestions to change the model. If you have a question that OPB can answer, a response will be sent to the email address provided. If your issue needs to be addressed by the ABB Review Committee, you will receive a notification when it is added to one of their meeting agendas.
ABB Reports and Resources: The ABB Steering Committee provided recommendation for the adoption and implementation of the ABB model. Below are the materials from that implementation phase, along with more recent materials (an audit from 2014 and a 2015 summary, for background information).
Peer Institutions : Other Universities have implemented a similar budget structure. Below are the links to their budget models:
- UW Budget
- Tuition & Fees
- UW Data
- State Operations
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